Banks clobber overdrawn account holders

Some top deals turn very nasty if you fall into the red, as one reader found out to his cost with Alliance & Leicester. By Jessica Bown

FIERCE competition for current account customers has obliged banks and building societies to offer more enticing deals, offset by sneakier charges and fees.

A particular favourite is the application of huge penalty charges for those who go overdrawn without permission or have insufficient funds to cover a direct debit or cheque.

Alliance & Leicester offers the best current account at the moment. Its Premier Plus account pays credit interest of 4.89% and offers an interest-free overdraft of up to £2,500 for the first 12 months. After that, it charges 7.9% for both authorised and unauthorised borrowing.

However, the bank’s penalty charges are punitive, as Sunday Times reader Anthony Peel, 62, has discovered to his cost in the year or so since he opened a Premier Plus account. A retired pharmacist from West Yorkshire, he said: “I was attracted to the A&L account because it offered good interest rates on both